– OCTOBER 2017 INSIGHTS BY THE CURVE TEAM –
- The RBA once again elected to leave the cash rate on hold at 1.50% following their October Board meeting.
- Governor Lowe remained optimistic in the accompanying statement as data largely continues to support the RBA’s central forecasts.
- Increased rhetoric coming from central banks in regard to the pace of monetary policy normalisation.
- The consumer continues to be a cause for concern for the RBA following poor retails sales numbers for another month.
Australian Economic Highlights
- Following a weather effected slowdown in Q1, Growth improved in the second quarter with the economy expanding by 0.8%. The Australian economy now holds the record outright for the longest run of growth without a recession at 104 quarters.
- CPI was weaker than expected in Q2 with the headline reading of 0.2% short of the 0.4% expected. The result saw the annual rate fall below the RBA’s target band. The RBA’s preferred measure, core inflation also remained below the band at 1.8% after a quarterly increase of 0.5%.
- Employment data continued to reflect strong labour market conditions with total job growth of 54,200 for August, coming in well above expectations. The unemployment rate remained unchanged at 5.6% coinciding with a 0.2% lift in the participation rate.
- Despite ongoing strength in the labour market, ANZ job ads printed flat for September. This ends six months of robust growth however job ads are still up 12.5% for the year.
- The NAB business conditions index continued it’s strong performance in September with the index sitting at 14, remaining well above the long run average of 5. Business confidence lifted from last months decline, posting a gain of 2 points to 7. Interesting was the decline in employment conditions to 7.
- Consumer confidence continues to languish as weak wages growth and tightening credit standards continue to impact family finances. The ongoing weakness is starting to show up to a greater degree in consumption data.
- Retail sales continue to be a cause for concern dropping 0.6% in August while the July figure was also revised down to 0.2%.
- Housing finance continues to be impacted by the macro prudential restrictions imposed by the council of financial regulators. The downward trend in investment housing commitments continued in July, falling 3.9%.
- A lift in commodities prices month helped lift Australia’s trade surplus for August, the surplus lifted to $989m. The uplift was also assisted by an upward revision to the July surplus, up to $808m from $460m.
- Building approvals look like they have reached the bottom of the cycle and trending upwards following the 0.4% increase for August. The lift looks like it is largely attributed to the 4.8% increase in private sector dwellings (excluding houses). Approvals are still down 15.5% for the year.
- Motor vehicle sales bounced back from the soft July reading, increasing 0.3% for August.